Why should you want to do strategic planning faster? Simply put, the time spent planning is time taken away from other activities. In addition, if you use a facilitator or consultant, a shorter engagement will cost you less. Some companies skip planning entirely to save time – but that’s penny-wise and pound-foolish. To responsibly scale back your planning process, we will be sharing some approaches we have used in the past – along with the issues that they bring.
The basic idea in these approaches is to limit the time you spend on things that will have limited value. While strategy itself has incredible value, not every part of the process is equally valuable. An experienced facilitator can help with this a lot, but here are the three easiest changes to make with Simplified Strategic Planning:
- Limit your market segments
- Limit the size of your team
- Cut out low-impact exercises (at least temporarily)
Article 1 – Limit your market segments
Market segmentation helps make better strategy. A targeted segment strategy that delivers value to specific customers is one of the easiest ways to distinguish your business, especially if you have larger, more established competitors.
As a general rule, the more segments you have, the finer the focus you can have on specific groups of customers. This doesn’t mean you should have hundreds of segments, but it does mean you will find value in adding more segments as you grow your business. The downside of each added segment is that it takes time to research analyze and formulate a strategy for every one of them. In my practice, I put a hard limit of 10 segments on all businesses, because when you have more than ten of anything, it becomes unwieldy and time-consuming.
In smaller companies, one, three or five segments can make much more sense than ten, because you can spend less time on research, analysis, and strategy. Here are some critical questions to ask when looking at your segmentation:
- Do we offer a different value to this segment?
- Do we compete differently here?
- Does this segment ask for things that other segments do not?
- Is our competitive position stronger or weaker in this segment?
As an example, consider a company that sells plumbing services. A simple breakdown might separate home plumbing services from commercial properties. That might be enough for a small business to understand the needs and preferences of their market. With a little more effort, you might break up each of those markets by customer preferences for speed, cost, fixture types, quality or specific technical abilities, yielding 10 or more segments. Good segmentation in strategic planning starts with an understanding of who you are selling to, and why they choose to buy from you. This means it’s quite helpful to ignore any segment you aren’t currently selling into.
How do we reduce the number of segments even more? To begin with, most segments revolve around 2 to 4 attributes that are important preferences of most customers. In plumbing for retail stores, it might be speed, quality, and cost. This means that other, similar segments that are driven by those three preferences could be combined with retail stores, so, for example, it wouldn’t be surprising to find theaters, restaurants, and even light manufacturing lumped together in a segment we might call “light commercial” While data gathering and analysis may be a little murkier with this combined segment, the plumbing supplier likely faces the same competitors in each subgroup and will succeed with the same strategy.
When I’ve worked with companies for several years, it’s not uncommon to see similar segments combined in this way. It’s helpful for keeping the strategy meetings shorter, and it rarely loses the value that the original segmentation brings.
The main drawback to look out for when reducing the number of market segments you use in strategic planning is the danger of treating very different customers as if they are the same. If you have a bunch of 10-year-old customers and a bunch of 20-year-old customers, no one will appreciate you taking the average and treating everyone like they are 15 years old. This means you need to make sure you aren’t losing an important factor when you combine segments, and that can take some careful consideration.
Since each market segment leads to 3 research worksheets and a separate strategy in Simplified Strategic Planning, it’s easy to see that cutting from 10 segments down to 3 would chop a big chunk of time out of both preparation and the strategy meetings themselves. If you have limited resources or are pressed for time, this is a very useful step to take in simplifying your strategic planning.
In my next post, I’ll discuss the usefulness of limiting the size of your team, with some of the pros and cons of that approach to simplifying your strategic planning.